We’re living in such a different world now that it can sometimes feel overwhelming. COVID-19 continues to upend our lives, and can derail our financial literacy too. However, there’s a lot we can still do – here are seven things to do now.
- Avoid making financial decisions out of fear
Eventually we will be on the other side of this crisis – albeit with a ‘new normal’. So, it doesn’t help to panic. Emotional situations tend to lead to poor financial choices, so be sure to get the help you need as you make financial decisions during an emergency. Take the time to do your research and ask for advice from a trusted, qualified source on what to do. Keep a close eye on your financial numbers and adjust as required before it becomes a crisis. Our Smart Money Date is crucial in these uncertain times.
- Find out what financial help is available
Governments across the globe are acting to support their damaged economies and are offering affected citizens direct help, including leave and self-isolation support, subsidised wages, business cash flow and tax measures. Find out what your government is doing by visiting their official COVID-19 websites.
Some governments are also sending small(ish) lump sums to their citizens. For example, under its new President, the US government recently sent checks to their people at $1,400 each in fiscal support – but used massive debt to do so. Use this direct assistance wisely – I suggest adding this windfall into your Rainy-Day Fund.
- Make an emergency money plan
Especially during an emergency, creating a money plan is key. Financial stresses can cause considerable hardships for you and your family – so having a plan helps bring peace of mind.
Work through a scenario for possible reduced income. In order to best manage your money, it’s important to identify your incomings and outgoings as you’ll have learnt in our Smart Money Method™ program. Focus on your immediate “needs” while trying to cut back on any unnecessary “wants”.
Give every single dollar a job to do. This means you decide what all of your money will be used for and prioritise what’s most important.
Ensure you continue to put what you can aside into your Rainy-day Fund – this is your safety net. It may even be that you need to judiciously access this emergency fund, after all COVID-19 could be considered a “rainy-day” for most of us.
However, if things are still too tight to manage, check what financial help may be available.
- Find out all your options before taking on more debt
If you feel you need to borrow to get by as a last resort, take pause! It’s critical not to run to the easiest money available. Credit lines are opening up again but remember the goal of the Smart Money Method™ is to eliminate debt and live within your means. Remove all emotion from this important decision to increase debt levels and look for alternatives in the first instance.
Options may be government support, a temporary loan or mortgage deferral, or consolidating your debt to a lower interest rate with more manageable payments.
The goal is to get through and create as little debt as possible.
- Can’t make repayments? Talk to your lender as early as possible to make arrangements
If you find yourself in a very tight financial situation, remember our advice – the earlier you talk to your bank or lender, the better. They’re often willing to make things work with you and your loan. The sooner you get in touch, the better placed they are to help you deal with financial stress. After all, they deal with this sort of thing all the time. Depending on what you’re experiencing, your lender could:
- Temporarily suspend loan repayments. Bear in mind though even though your repayments are on pause, the interest will continue to add up – a loan deferral makes the debt more expensive
- Move you to interest-only payments
- Restructure business loans
- Consolidate loans to make repayments more manageable
- Provide short-term funding
- Stay safe from COVID-19 scams
Crises tend to bring out the best in all of us, but unfortunately the worst can also be seen if you look carefully. Frauds and scams related to this virus are popping up everywhere, especially online, so make sure to verify every call, link and email that comes your way – it could easily be a fake. A good way to check is to make a separate call to a published number to make sure something’s the real deal.
- Ignore your retirement account balance
If possible, avoid the temptation to take partial withdrawals, if allowed, from your dedicated retirement accounts. All you are doing is kicking the can down the road as this will damage your retirement years by having less to invest.
You may also be concerned about the ups and downs of your balances as markets have been jumpy due to the virus, lockdowns, border closures, company profits being hit, etc. As long as you’re in the right type of fund for you, feel free to not look for a while – just ride it out.
